Correlation Between Munic SA and Claranova

Can any of the company-specific risk be diversified away by investing in both Munic SA and Claranova at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Munic SA and Claranova into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Munic SA and Claranova SE, you can compare the effects of market volatilities on Munic SA and Claranova and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Munic SA with a short position of Claranova. Check out your portfolio center. Please also check ongoing floating volatility patterns of Munic SA and Claranova.

Diversification Opportunities for Munic SA and Claranova

-0.48

Correlation Coefficient

Munic SA  Claranova

Very good diversification

The 3 months correlation between Munic and Claranova is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Munic SA and Claranova SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Claranova SE and Munic SA is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Munic SA are associated (or correlated) with Claranova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Claranova SE has no effect on the direction of Munic SA i.e., Munic SA and Claranova go up and down completely randomly.

Pair Corralation between Munic SA and Claranova

Assuming the 90 days trading horizon Munic SA is expected to generate 2.37 times more return on investment than Claranova. However, Munic SA is 2.37 times more volatile than Claranova SE. It trades about 0.06 of its potential returns per unit of risk. Claranova SE is currently generating about -0.08 per unit of risk. If you would invest  50.00  in Munic SA on September 29, 2024 and sell it today you would earn a total of  12.00  from holding Munic SA or generate 24.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.22%
Values	Daily Returns

Munic SA  vs.  Claranova SE

Munic SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Munic SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Munic SA reported solid returns over the last few months and may actually be approaching a breakup point.

Claranova SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Claranova SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Munic SA and Claranova

The main advantage of trading using opposite Munic SA and Claranova positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Munic SA position performs unexpectedly, Claranova can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Claranova will offset losses from the drop in Claranova's long position.

The idea behind Munic SA and Claranova SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.